Integrated Finance Organizations outperform others: effective integration of information across the enterprise was found to be a key differentiator for financially successful companies in a recent study by IBM, The Wharton School and the Economist Intelligence Unit.

• Author: Rogers, Stephen
• Position: GLOBAL CFO

The CEOs of a major airline and of a Fortune 50 company were discussing the possibility of a favorable travel relationship between the two companies when the airline CEO asked, "How much do you spend annually on air travel?"

The Fortune 50 CEO didn't know, off the top of his head, but he figured he could get a response pretty fast.

Well, weeks went by, and his organization was unable to get the answer. As it turned out, the answer was--literally--technically not ascertainable. Why? Because the 100-plus countries in which the company did business all tracked travel differently--using different schedules, procedures, cycles and definitions. Data was kept in different--and noncommunicating--systems.

The incident served as a wakeup call for the company. If it couldn't answer that "simple" expense question, then how could it possibly manage staff, infrastructure, supplies, inventories, collections, payables and countless other measures that were, arguably, far more important, and certainly more complex, than T & E?

According to a recent study, Balancing Risk and Performance with an Integrated Finance Organization--developed by IBM Global Business Services' Financial Management Practice and the IBM Institute for Business Value (IBV), in cooperation with The Wharton School of the University of Pennsylvania and the Economist Intelligence Unit--a surprising number of enterprises are unable to answer the sort of question that this CEO could not, let alone handle the impact of a major risk event to their organization. More than 1,200 CFOs and senior finance executives from 79 countries around the world were interviewed for the study.

The study found that in the past three years, respondents from 62 percent of enterprises with over $5 billion in revenue had encountered a major risk event. When a major risk event did occur--be it strategic, operational, environmental, financial, legal or geopolitical--42 percent of these enterprises were not well prepared. The primary reason is that many, if not most, of these firms do not have adequate access to information.

Indeed, it was found that effective integration of information across the enterprise was a key differentiator for financially successful companies. That then begged the question: what are the drivers of information integration within Finance?

These drivers are: 1) common data definitions enterprisewide; 2) a standard chart of accounts enterprisewide; 3) standard common processes enterprisewide; and 4) a corporate philosophy of globally mandated standards.

These are the primary components of good governance and what the study refers to as "Integrated Finance Organizations" (IFOs). A problem is that fewer than one in seven enterprises govern or manage the integration of their Finance organization by a combination of these four criteria.

One big advantage that the...